Key changes to REIQ commercial property contracts
3 November 2022
In July this year, the REIQ’s standard residential contracts were updated to reflect legislative changes that came into effect at the beginning of 2022.
The update from REIQ saw the release of new versions of the Contract for Commercial Land and Buildings (9th edition) and the Contract for Commercial Lots in a Community Titles Scheme (8th edition).
Some of the key changes include:
Automatic Extension of Settlement Date:
- The right for either party to extend settlement for a period of up to 5 business days from the original Settlement Date noted in the contract.
Expanded Warranties and Termination Rights:
- New termination rights for buyers regarding infrastructure unrelated to the delivery of services pass that through the land (that are not protected by a registered easement).
- New seller warranties confirming the seller has not received any communication from a competent authority that may lead to the issue of a show cause notice, enforcement notice, or notice to do work, and an expanded list of warranties in respect of current leases.
- An express provision for paying a deposit by direct debit and a grace period allowed to address the impact of delays in the depositing of money into accounts when using electronic payment methods.
A closer look at these changes
Automatic Extension of Settlement Date
Clause 6.2 of the new version of the REIQ contracts has been amended to allow for either party to extend the Settlement Date for up to 5 Business Days from the original Settlement Date noted in a contract, at any time prior to the original Settlement Date, provided the settlement extension notice is given prior to 4pm (in writing) on the Scheduled Settlement Date and such notice is given in accordance with the contract.
Either party may exercise this clause more than once, provided that the requests do not exceed the 5 business days in total. This may lead to complications and additional costs for sellers such as moving and storage of belongings etc. The potential settlement extension should be taken into consideration by either party when entering into a contract and planning for settlement and moving.
Expanded Warranties & Termination rights
The new versions of the contracts have expanded the seller’s warranties to provide:
- That the seller warrants that it has not received any communication from a competent authority that may lead to the issue of a show cause notice, enforcement notice, or notice to do work;
- Clause 10.3 provides for expanded warranties in respect of the current leases that the seller warrants are current at the Contract Date. If there is any change to these warranties in any way between the Contract Date and the Settlement Date, the seller must notify the buyer
A buyer now also has a right of termination if there is:
- An error in the boundaries or area of the property;
- An encroachment by structures onto or from the property;
- Services that pass through the property that are not protected by a registered easement, or say a building management statement.
The above is not an exhaustive list and is only a summary of the key amendments. If you are looking to buy or sell commercial property, you should always review the contract terms carefully before signing and seek professional advice.